Legal Affairs

Court Ruling Could Lengthen Patent Term

PTO Was Found to Have Erroneously Applied Statute in Way that Shortchanged Patentees

The Federal Circuit started 2010 on a positive note for patent holders by affirming the district court decision in Wyeth v. Dudas (affirmed as Wyeth v. Kappos) on the proper interpretation of the patent term adjustment (PTA) statute. The court determined that the U.S. Patent and Trademark Office (PTO) has erroneously interpreted the statute in a manner that shortchanges patentees by undercalculating PTA in certain circumstances.

Now that the Federal Circuit has affirmed the decision, the PTO should apply the court’s interpretation of the statute, which could result in longer PTA awards for many patents. Biotechnology patents in particular may benefit from this ruling, because of the timing and type of examination delays biotechnology applications often encounter. To maximize patent term and patent value, applicants should understand the PTA statute and take PTA into account when formulating patent strategies.

While older U.S. patents have a 17-year term measured from the grant date, patents issuing from applications filed on or after June 8, 1995, have a 20-year term that runs from the earliest effective nonprovisional U.S. filing date. The change to a 20-year patent term drove home the adverse consequences of delays in the patent examination process, as any delay in examination now shortens the effective term of the patent.

To address this problem, Congress enacted the PTA statute (35 U.S.C. § 154(b)(1)) to provide patent term adjustment to compensate for PTO delays under certain circumstances. The statute provides “guarantees” against three different types of delay:

“A” delay, when the PTO fails to act in accordance with set time frames (such as issuing a first office action within 14 months, issuing a second action or allowance within four months of a response, and issuing a patent within four months of the issue fee payment).

“B” delay, when the PTO fails to issue a patent within three years of the actual filing date of the patent application.

“C” delay, when the application is involved in an interference or appeal, or is subject to a secrecy order.

The statute also provides that “to the extent that periods of delay...overlap, the period of adjustment...shall not exceed the actual number of days the issuance of the patent was delayed.” The issue in the Wyeth case surrounded the interplay between A delay and B delay, and how double counting of those types of delay is to be avoided.

Since at least 2004, the PTO has taken the position that any A delay contributes to B delay, and thus “overlaps” with B delay. The PTO has explained that any failure to meet the time frames counted as A delay directly contributes to, and may result in, any failure to meet the “three-year” guarantee that is counted as B delay. Thus, according to the PTO, all A delay in effect overlaps with any B delay, and so must not be double counted. Under this interpretation, the PTO awards PTA for only the longer of its A delay or its B delay, not both.

Wyeth challenged this interpretation, arguing that A delay and B delay only overlap if the delay occurs on the same calendar day. Thus, for example, only A delay that occurs more than three years after the filing date of the application could overlap with B delay, because B delay does not begin to occur until the application has been pending for three years.

The district court agreed with Wyeth, and the Federal Circuit now has affirmed that decision. The Court determined that the clear and unambiguous statutory language provides that “no overlap happens unless the violations occur at the same time.” The Court emphasized that “before the three-year mark, no overlap can transpire between the A delay and the B delay” and that “if an A delay occurs on one day and a B delay occurs on a different day, those two days do not overlap” under the statute.

The Wyeth decision could result in additional PTA for many patents, particularly for biotechnology patents that often experience both A delay and B delay. According to the 2009 patent pendency statistics published by the PTO, patent applications in the fields of biotechnology and organic chemistry wait for an average of 22.5 months before receiving a first office action. That represents an average A delay of 8.5 months for the first action alone. While the average biotechnology application is granted in just under three years (35.1 months), many applications take longer to issue, and so also experience B delay.

As noted above, until the Federal Circuit’s Wyeth decision, the PTO would award PTA based on the A delay or the B delay (whichever was longer), but would not add A delay and B delay, even if the A delay occurred early during pendency. Now that the Court has determined that A delay and B delay should be added when determining the total PTA award, many patents that were pending for more than three years will be entitled to a longer term.

For example, if the PTO took 22.5 months to issue a first office action (an A delay of 8.5 months) and the patent issued three years and six months after its filing date (a B delay of six months), the patentee now will be credited with 14.5 months of delay under Wyeth, where the PTO previously would have credited only 8.5 months of delay (the longer of the two types of delay).

This additional patent term may be particularly valuable to biotechnology and pharmaceutical patents, which often reach their maximum value toward the end of their term. Patentees who may be affected by this decision should consider contacting counsel as soon as possible to determine whether additional PTA can be obtained.

Courtenay C. Brinckerhoff (CBrinckerhoff@foley.com) is a partner at Foley & Lardner and vice chair of the chemical, biotechnology, and pharmaceutical practice. Web: www.foley.com. The views expressed in this article do not represent the opinion of Foley & Lardner or its clients.

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